Budget balanced but BC Liberals take flak over plan to raise taxes and sell assets

Jonathan Fowlie, The Vancouver Sun02.20.2013

Premier Christy Clark looks on as British Columbia Finance Minister Mike de Jong leaves the Legislature after tabling the budget in Victoria, Tuesday, Feb. 19, 2013.Jonathan Hayward
/ THE CANADIAN PRESS

Premier Christy Clark, left, looks on as British Columbia Finance Minister Mike de Jong tables the budget in the B.C. Legislature in Victoria, Tuesday, Feb. 19, 2013. THE CANADIAN PRESS/Jonathan Hayward

Premier Christy Clark looks on as B.C. Finance Minister Mike de Jong tables the budget in the B.C. Legislature in Victoria on Tuesday, Feb. 19, 2013.Jonathan Hayward
/ Canadian Press

Premier Christy Clark looks on as Finance Minister Mike de Jong tables the budget in the B.C. Legislature in Victoria on Tuesday, Feb. 19, 2013.Jonathan Hayward
/ Canadian Press

Coming 12 weeks before a provincial election that most polls show strongly favours the opposition New Democratic Party, Tuesday’s budget allows Clark to make good on a long-standing promise to move the province away from four consecutive years in the red.

But in doing so, Clark’s government faced criticism on how she plans to accomplish that goal — by selling more than $800 million in provincial assets and introducing government-wide spending restraints on par with the dramatic measures the B.C. Liberals imposed during their first few years in office.

And while Tuesday’s announced return to a balanced budget scored a win with the Liberal-friendly business community, some industry leaders took a shot at Clark for turning her back on them in other ways.

“There’s no mention (in the budget) at all of the fact that we’re going to have the single largest tax increase on jobs and investment as of April 1 with the $1.5-billion return to the PST,” said Greg D’Avignon, president of the Business Council of B.C.

“There’s a layering on of costs of doing business here in British Columbia and we are uncompetitive,” he added. “We were one of the most competitive jurisdictions in North America and we’re going to become one of the most uncompetitive. That has an impact on job creation, on economic growth.”

The government’s budget includes a one-percentage-point increase to the province’s corporate income tax starting April 1, bringing the rate to 11 per cent.

It also included a temporary increase in personal income taxes — set to begin Jan. 1, 2014 — for people making more than $150,000 per year.

Dix has hinted that both measures would be part of a fully costed NDP election platform — due for release in the coming weeks — although his proposal would have increased corporate taxes by an additional percentage point to 12 per cent.

Tuesday’s budget also included a four-per-cent increase to MSP premiums – bringing the rate as of Jan. 1, 2014, to $138.50 for families of three or more — and a $2-per-carton increase to the tax on cigarettes starting in October.

On the spending side, the budget holds planned increases in government spending for the coming year to under one per cent — a level below the expected growth in the province’s GDP.

Finance Minister Mike de Jong acknowledged the government-wide spending controls comprised many tough decisions, but insisted all targets are “plausible and achievable”.

After combining all these measures with plans in the coming year to sell $475 million in surplus government assets — as well as a combined windfall of about $330 million expected from the completion of the sale of assets including Little Mountain and the Vancouver Liquor Distribution Branch warehouse — the government says it will end the coming year with a $197-million surplus.

“Today, I am presenting what we promised to the people of British Columbia, and what they have worked hard to achieve — a balanced budget,” de Jong told the Legislature.

“We will not spend money we don’t have. We will not have a legacy of needless debt.”

Despite that promise, Tuesday’s budget increases the province’s total debt by $13.3 billion between now and 2016, pushing the taxpayer-supported debt-to-GDP ratio above 18 per cent.

While de Jong stressed the prudence of Tuesday’s budget, he was still able to unveil some pre-election goodies, mostly focused on helping families.

Among the measures, the government is changing a program introduced by former premier Gordon Campbell that has invested $1,000 for every child born after 2007 in a government-managed post-secondary education fund. Parents were told they could expect a payment of about $2,200 for their child’s post-secondary education by the time the child graduated high school.

On Tuesday, Clark’s government announced parents can now access that fund much earlier, by having the province deposit $1,200 directly into the child’s Registered Education Savings Plan while the child is still young.

“When the child turns six years of age, the government will send to their family — direct into an RESP — $1,200,” said de Jong, adding he hopes the measure will encourage parents to start registered savings plans to help pay for their children’s university or college educations.

Tuesday’s budget also includes a commitment of $76 million over three years to help create child care spaces, as well as additional tax relief for parents starting in 2015. That tax relief program — the B.C. Early Childhood Tax Benefit — will be worth up to $660 per child annually for lower-income families.

NDP finance critic Bruce Ralston called Tuesday’s document a “classic pre-election budget by the B.C. Liberals”, one he said isn’t truly balanced because it rests on the sell-off of hundreds of millions of dollars of government assets.

“(This is) a pre-election budget, not a balanced budget, and it doesn’t really address the real needs of British Columbians,” Ralston said.

The bulk of measures introduced Tuesday do not take effect until after the May 14 election, meaning many could still be reversed if the government were to change.

Nevertheless, Ralston would not say what elements of the budget his party would adopt or discard, saying those details will be released in the near future.

“I’m not prepared to make any commitments at this time. That will be revealed when we get an opportunity to disclose our platform before the election.”

John Winter, president of the B.C. Chamber of Commerce, said he thinks the government could have done more to soften the blow coming from the April 1 return to a PST, but was quick to applaud the return to a projected surplus.

“Good on them for living up to the commitment to balance the budget,” he said. “It’s hard to do, but I think it’s realistic.”

Union leaders were highly critical, however, questioning a decision to balance the books months before the May election on the back of planned asset sales.

“This is not a balanced budget,” said Jim Sinclair of the B.C. Federation of Labour. “We’re going to have a fire sale so (de Jong) can balance the budget.”

Sinclair also blasted the government on plans to shrink the public service by about 1,200 spaces over two years.

“This budget kills 1,200 jobs in British Columbia that are good-paying jobs that support communities in health care and education and forestry,” he said, in comments that were echoed by B.C. Government and Service and Employees’ Union president Darryl Walker.

“They call it attrition, but it’s still warm bodies that are going to be in cold seats,” said Walker. “People are going to be doubling up. They’re going to be doing twice as much work. There’s fear that people are going to be put in positions of danger.”

The budget also saves around $150 million that would have been due in the coming year by pre-paying a variety of grants and other obligations.

The temporary personal income tax increase promised in the budget will cover only the top income tax bracket, or those making more than $150,000. The move — which will last for two years until the end of 2015 — will raise the provincial rate to 16.8 per cent from 14.7 per cent.

For a person making $300,000, the increase would mean an extra $3,100 in taxes each year.

“We are asking people who make a little more to contribute a little more,” said de Jong, adding the measure was needed to help return the province to a surplus position.

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Budget balanced but BC Liberals take flak over plan to raise taxes and sell assets

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